1.5

Information on alternative performance measures

In this report and other public disclosures, X5 Retail Group presents certain alternative performance measures (APMs) that it believes provide readers with a more detailed and accurate understanding of the Company’s financial and operating performance. In accordance with European Securities Markets Authority guidelines, a list of definitions, explanations of the relevance of APMs, comparatives and reconciliations are provided below.

EBITDA

(including EBITDA margin)

Earnings before interest, tax, depreciation and amortisation (EBITDA) is a measure of the Company’s operating performance. It is a way to evaluate X5 Retail Group’s performance exclusive of financing, accounting and taxation factors. X5 believes that showing EBITDA and EBITDA margin performance provides readers with greater detail about the Company’s performance.

RUB mln

2017

2016

Operating profit

57,758

45,631

Depreciation, amortisation and impairment

38,435

30,636

EBITDA

96,193

76,267

RUB mln

2017

2016

Revenue

1,295,008

1,033,667

EBITDA

96,193

76,267

EBITDA margin, %

7.4

7.4

Adjusted EBITDA

(including adjusted EBITDA margin)

Adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA) is a measure of the Company’s operating performance. It is a way to evaluate a company’s performance exclusive of financing, accounting and taxation factors, and also excluding the effects of the LTI programme, which does not represent an ongoing cost of doing business. X5 believes that showing adjusted EBITDA and adjusted EBITDA margin performance provides readers with a more accurate understanding of the Company’s ongoing performance.

Adjusted SG&A

(including adjusted SG&A as % of revenue)

Selling, general and administrative expenses (SG&A) are reported on the income statement as the sum of all direct and indirect selling expenses and all general and administrative expenses of the Company. X5 Retail Group reports adjusted SG&A, which excludes the effects of the LTI programme, as well as depreciation, amortisation and impairment. The Company believes that adjusted SG&A provides additional detail to readers looking to understand the long-term SG&A costs of the business.

Adjusted net profit

(including adjusted net profit margin)

Adjusted net profit is a measure of the Company’s earnings for the reporting period, adjusted for: a) income tax expense affected by the Company’s dividend policy (change in deferred tax liability associated with investments in subsidiaries); and b) a non-recurring increase in impairment related to the Perekrestok Express segment as a result of the decision to focus on the three major formats. X5 believes that showing adjusted net profit and adjusted net profit margin performance provides readers with a more accurate understanding of the Company’s ongoing performance.

RUB mln

2017

2016

Net profit

31,394

22,291

Adjustments:

Change in deferred tax liability associated with investments in subsidiaries

1,158

–

Increase in impairment and DTA write-off related to Perekrestok Express

1,216

n.a.

Adjusted net profit

33,768

22,291

RUB mln

2017

2016

Revenue

1,295,008

1,033,667

Adjusted net profit

33,768

22,291

Adjusted net profit margin, %

2.6

2.2

Net debt/EBITDA

The net borrowings to earnings before interest depreciation and amortisation (EBITDA) ratio is a measurement of leverage. It is calculated as the Company’s long-term and short-term borrowings, minus cash and cash equivalents, divided by EBITDA. The net debt to EBITDA ratio is a commonly used indicator that helps readers to understand the Company's debt burden.

RUB mln

31 Dec 17

31 Dec 16

Total debt, incl.:

194,296

156,033

Short-term borrowings

58,674

45,168

Long-term borrowings

135,622

110,865

Cash and cash equivalents

(27,605)

(18,190)

Net debt

166,691

137,843

EBITDA

96,193

76,267

Net debt/EBITDA

1.73x

1.81x

Net retail sales

Net retail sales shows the amount of sales generated by the Company after the deduction of revenue from franchise services, wholesale operations and other services. Because food retail is X5 Retail Group’s core business, net retail sales is provided for readers to more clearly understand the performance of the Company’s core business activity.

RUB mln

2017

2016

Revenue

1,295,008

1,033,667

Adjustments:

Revenue from wholesale operations and other services

(8,030)

(8,044)

Revenue from franchise services

(29)

(34)

Net retail sales

1,286,949

1,025,589

Like-for-like (LFL)

LFL comparisons of retail sales between two periods are comparisons of retail sales in the local currency (including VAT) generated by relevant stores. The stores that are included in LFL comparisons are those that have operated for at least 12 full months. Their sales are included in the LFL calculation starting from the day of the store’s opening. We include all stores that fit our LFL criteria in each reporting period. This is a commonly used indicator in the retail industry that helps readers understand the sustainability of a company’s growth by focussing on the performance of stores that have already been operating for more than 12 months, by removing the effect of new stores opened during the period.